Hostname: page-component-8448b6f56d-42gr6 Total loading time: 0 Render date: 2024-04-19T04:14:35.348Z Has data issue: false hasContentIssue false
  • English
  • Français

Fine Wines and Stocks from the Perspective of UK Investors: Hedge or Safe Haven?*

Published online by Cambridge University Press:  03 May 2016

Elie I. Bouri  and
David Roubaud
Elie I. Bouri
Affiliation:
USEK School of Business, Holy Spirit University of Kaslik, Lebanon, P.O. Box 446, Jounieh, Lebanon; e-mail: eliebouri@usek.edu.lb.
David Roubaud
Affiliation:
Montpellier Business School, 2300 Avenue des Moulins, 34080 Montpellier, France; e-mail: d.roubaud@montpellier-BS.com.
Get access Rights & Permissions [Opens in a new window]

Abstract

The prior literature disregards the time-varying conditional correlation and its importance for portfolio diversification when it assesses the risk-return profile of fine wine with that of stocks. To address this limitation, this paper applies a dynamic conditional correlation model and examines the co-movements between fine wine and stock prices in the United Kingdom (UK). Based on monthly data from January 2001 to February 2014, we find that fine wine is a hedge against movements in UK stocks. Nevertheless, it cannot act as an effective safe haven during market turmoil. Those findings have noteworthy implications for financial advisors and portfolio managers who are interested in alternative investments. (JEL Classifications: G1, G11, Q1, Q14)

Keywords

Dynamic conditional correlationfine wineshedgesafe havenUK stocks
Type
Articles
Information
Journal of Wine Economics , Volume 11 , Issue 2 , August 2016 , pp. 233 - 248
Copyright
Copyright © American Association of Wine Economists 2016 

Access options

Get access to the full version of this content by using one of the access options below. (Log in options will check for institutional or personal access. Content may require purchase if you do not have access.)

Footnotes

*

I acknowledge and thank the editor, Karl Storchmann, and an anonymous referee for their constructive comments. Without their valuable suggestions and time, this paper would not have been possible.

References

Baur, D.G., and Lucey, B.M. (2010). Is gold a hedge or a safe haven? An analysis of stocks, bonds and gold. Financial Review, 45, 217–229.Google Scholar
Bollerslev, T. (1990). Modeling the coherence in short-run nominal exchange rates: A multivariate generalized ARCH model. Review of Economics and Statistics, 72, 498–505.Google Scholar
Bouri, E. (2013). Do fine wines blend with crude oil? Seizing the transmission of mean and volatility between two commodity prices. Journal of Wine Economics, 8, 49–68.Google Scholar
Bouri, E. (2014). Beyond the negative relation between return and conditional volatility in the wine market: Is fine wine particularly luscious for investors? International Journal of Wine Business Research, 26(4), 279–294.Google Scholar
Celik, S. (2012). The more contagion effect on emerging markets: The evidence of DDC-GARCH model. Economic Modelling, 29, 1946–1959.Google Scholar
Cevik, S., and Sedik, T.S. (2013). A barrel of oil or a bottle of wine: How do global growth dynamics affect commodity prices? Journal of Wine Economics, 9(1), 34–50.Google Scholar
Chiang, T.C., Jeon, B.N., and Li, H. (2007). Dynamic correlation analysis of financial contagion: Evidence from Asian markets. Journal of International Money and Finance, 26, 1026–1228.Google Scholar
Chu, P.K.K. (2014). Study on the diversification ability of fine wine investment. Journal of Investing, 23(1), 123–139.Google Scholar
Engle, R. F. (2002). Dynamic conditional correlation: A simple class of multivariate GARCH models. Journal of Business and Economic Statistics, 20, 339–350.Google Scholar
Engle, R., and Sheppard, K. (2001). Theoretical and empirical properties of dynamic conditional correlation multivariate GARCH, University of California at San Diego, Economics Working Paper Series 01/2001.Google Scholar
Fogarty, J. (2007). Rethinking wine investment in the UK and Australia. Working Paper No. 6 American Association of Wine Economists.Google Scholar
Fogarty, J. (2010). Wine investment and portfolio diversification gains. Journal of Wine Economics, 5, 119–131.Google Scholar
Fogarty, J., and Sadler, R. (2014). To save or savor: A review of approaches for measuring wine as an investment. Journal of Wine Economics, 9(3), 225–248.Google Scholar
Harris, R., and Nguyen, A. (2013). Long memory conditional volatility and asset allocation. International Journal of Forecasting, 29, 258–273.Google Scholar
Jarque, C., and Bera, A. (1980). Efficient tests for normality, homoscedasticity and serial independence of regression residuals. Economics Letters, 6, 255–259.Google Scholar
Kourtis, A., Markellos, R., and Psychoyios, D. (2012). Wine price risk management: International diversification and derivative instruments. International Review of Financial Analysis, 22, 30–37.Google Scholar
Ljung, G., and Box, G. (1979). On a measure of lack of fit in time series models. Biometrika, 66, 265–270.Google Scholar
Masset, P., and Henderson, C. (2010). Wine as an alternative asset class. Journal of Wine Economics, 5(1), 87–118.Google Scholar
Masset, P., and Weisskopf, J.-P. (2010). Raise your glass: Wine investment and the financial crisis. Working Paper No. 57. American Association of Wine Economists.Google Scholar
Qiao, Z., and Chu, P.K.K. (2014). Does fine wine price contain useful information to forecast GDP? Evidence from major developed countries. Economic Modelling, 38, 75–79.Google Scholar
Sanning, L., Shaffer, S., and Sharratt, J.M. (2008). Bordeaux wine as a financial investment. Journal of Wine Economics, 3(1), 61–81.Google Scholar
Storchmann, K. (2012). Wine economics. Journal of Wine Economics, 7(1), 1–33.Google Scholar
Supplementary material: File

Bouri and Roubaud supplementary material

Bouri and Roubaud supplementary material 1

Download Bouri and Roubaud supplementary material(File)
File 18.1 KB